• GBP/USD held the 200-day exponential moving average into Tuesday's close, but only just, after a soft UK labour market print did not stop the slide through the prior session's range.
• Average weekly earnings including bonuses came in hot at 4.1% versus 3.8% consensus, while the Unemployment Rate ticked up to 5% and the Claimant Count rose by 26.5K.
• Wednesday's Consumer Price Index (CPI) print is now the catalyst that resolves it, with headline inflation seen falling sharply from 3.3% to 3%.

Tuesday handed the Pound a labour market reading that was mixed enough to satisfy nobody. UK payroll data showed Average Earnings excluding bonuses cooling to 3.4% on the three-month-on-year measure, in line with consensus, while the Including Bonus figure ran hot at 4.1% against a 3.8% expectation. The Employment Change print was a chunky 148K, but the headline ILO Unemployment Rate ticked up to 5% versus the 4.9% reading both expected and prior, and the Claimant Count Change came in north of 26K.

The Bank of England (BoE) had wanted a clean signal. Instead it got a labour market that is still adding jobs faster than the population is willing to absorb them, with wages mostly cooling but a stubborn bonus-driven tail, and unemployment quietly drifting higher. Sterling slid through Tuesday's London session, eventually probing below 1.34 in late trade before clawing back toward the handle into the close.

The chart tells the harder story

GBP/USD's daily chart broke through the 50-day exponential moving average (EMA) last week and spent Tuesday testing the 200-day EMA, which sits just below current levels. That is the line that has held every meaningful pullback since the spring lows. A clean daily close below it would put 1.32 back in scope, with very little structural support in between. The Stochastic RSI on the daily is rolling over from the mid-range, which suggests there is room for the move to extend before it gets oversold.

The CPI test that sets the tone

Wednesday's CPI is the print that decides whether Tuesday's bounce off the 200-day EMA was meaningful or just noise. Consensus is for headline CPI to drop from 3.3% to 3% YoY, with Core CPI easing from 3.1% to 2.6%. A clean cooling print, particularly in the Services CPI component the BoE has been pointing at, gives the doves on the Monetary Policy Committee (MPC) the cover they need to argue for another cut sooner rather than later. The rates strip is already nudging in that direction.

A hot print would be the worst possible outcome for Sterling. It would not be enough to revive a hike narrative, but it would force the BoE to keep holding for longer, which is precisely the kind of stagflation-lite signal that has pressured the Pound through gilt yields all year. The fiscal noise around UK debt servicing has not gone away either, and a sticky core read would bring it straight back to the front of the conversation.

Setup into the rest of the week

A daily close back above the 50-day EMA puts Tuesday's break in the rearview. A daily close below the 200-day EMA, particularly on a cool CPI that is read as accelerating the cutting path, opens the door toward the 1.32 handle. Thursday's S&P Global Composite PMI, expected to soften toward 51.7 from 52.6, and Friday's Retail Sales print, where consensus is for a 0.6% month-on-month contraction, fill out the week's catalysts. Both lean in the same direction.

The Pound goes into Wednesday morning with everything to lose and very little ready to support it.

GPB/USD 5-minute chart

Technical Analysis

In the five-minute chart, GBP/USD trades at 1.3400. The pair holds a bearish intraday bias as it remains below the day’s open at 1.3434, keeping the short-term tone pressured despite the absence of nearby structural supports on the chart. The Stochastic RSI has retreated from earlier overbought readings toward lower ground, suggesting waning upside momentum and leaving the path of least resistance tilted to the downside while price stays capped beneath the daily opening level.

On the topside, initial resistance is located at the day open around 1.3434, and a sustained break above this hurdle would be needed to ease immediate selling pressure and allow a corrective rebound. Until then, the lack of clearly defined intraday support levels below current price implies that any further declines could unfold into relatively thin air, with short-term sellers likely to remain in control while momentum oscillators stay soft.

In the daily chart, GBP/USD trades at 1.3395, holding a bearish near-term bias as it sits just under the 200-day exponential moving average (EMA) at 1.3401 and well below the 50-day EMA at 1.3470. This configuration suggests rallies remain capped by overhead trend resistance, while the Stochastic RSI near 28 hints that downside momentum is stretched but not yet decisively reversed.

On the topside, immediate resistance arises at the 200-day EMA around 1.3401, with a stronger barrier aligned at the 50-day EMA near 1.3470, and the pair would need to reclaim both to ease the current bearish tone. On the downside, the absence of nearby structural support levels in this dataset leaves the pair vulnerable to further slippage, with any fresh lows likely guided by how long price can remain suppressed beneath the 200-day EMA as the oversold Stochastic RSI tries to stabilize.

(The technical analysis of this story was written with the help of an AI tool.)